M&A activity in the healthcare industry has been on an upwards trend since our last update. Good Foundations: Building Healthcare M&A and Real Estate, a report by Mergermarket on deal-making trends in the industry, found that about 90% of the respondents expect healthcare M&A to rise over the next year. The value of healthcare deals in North America increased by 28% and reached a total of US$298 billion in 2015.
The North American healthcare industry is rapidly evolving and demanding that companies innovate to stay relevant. Several fundamental shifts, such as the move from fee-for-service to value-based care, are causing healthcare companies to alter their approach to investments. Technology is also impacting bottom lines, the provision of healthcare, and M&A activity in the industry. For instance, the medical devices that provide for safer, less invasive and more accurate treatments have been a major area of focus of mergers and acquisitions in the past few years. According to Mergermarket, medical market devices deals constituted US$57.5 billion in 2015 and the trend is expected to continue throughout 2016.
The technological advancements are also causing investors to take an increasing interest in digital health startups. 87% percent of the study’s respondents expect digital health startups to be the most sought out targets in 2016, with 71% and 56% holding the same opinion of hospitals and acute care providers, respectively. This is supported by the opinion that acquisition of digital health startups not only provide access to new ideas but also to human capital. The study also found that that increasing consumer demand for healthcare products as well as growing scale and keeping up-to-date with technological updates will be the two biggest drivers of M&A activity in the industry.
While the healthcare industry is faced with several challenges, there is also increased opportunity for growth and improvement. In order to make the most of these advancements, companies must embrace technology in both biotechnology as well as operational improvements.
The author would like to thank Shreya Tekriwal, summer student, for her assistance in preparing this legal update.
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